Gulf Coast Bank and Trust Company v. Designed Conveyor Systems, LLC
Filing
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RULING granting 4 Motion to Dismiss Pursuant to Federal Rules of Civil Procedure 12(b)(2), 12(b)(3), and 12(b)(6), Or, Alternatively, To Transfer, and the case is dismissed with prejudice. Signed by Judge James J. Brady on 9/14/2016. (LLH)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
GULF COAST BANK AND TRUST
COMPANY
CIVIL ACTION
VERSUS
NO. 16-412-JJB-RLB
DESIGNED CONVEYOR SYSTEMS, LLC
RULING
This matter is before the Court on a Motion to Dismiss Pursuant to Federal Rules of Civil
Procedure 12(b)(2), 12(b)(3), and 12(b)(6), Or, Alternatively, To Transfer (Doc. 4) brought by the
Defendant, Designed Conveyor Systems, LLC (“DCS”). The Plaintiff, Gulf Coast Bank And Trust
Co. (“Gulf Coast”), filed an Opposition (Doc. 9) and the Defendant filed a Reply (Doc. 16). Oral
argument is unnecessary. The Court’s jurisdiction exists pursuant to 28 U.S.C. § 1332. For the
reasons stated herein, the Defendant’s Motion to Dismiss Pursuant to Federal Rules of Civil
Procedure 12(b)(2), 12(b)(3), and 12(b)(6), Or, Alternatively, To Transfer (Doc. 4) is GRANTED
and the case is dismissed without prejudice.1
I.
BACKGROUND2
Defendant DCS is an Indiana limited liability company with its principal place of business
in Franklin, Tennessee.3 Affidavit of Kenneth Wood ¶ 4(a), Doc. 4-2. Plaintiff Gulf Coast is a
1
Because this Court is dismissing the case for lack of personal jurisdiction over the nonresident Defendant, it need
not address arguments relating to 12(b)(3), 12(b)(6), or 28 U.S.C. § 1404(a).
2
When a court considers a challenge to personal jurisdiction, “[t]he allegations of the complaint, except insofar as
controverted by opposing affidavits, must be taken as true, and all conflicts in the facts must be resolved in favor of
the plaintiffs for purposes of determining whether a prima facie case for personal jurisdiction has been established.”
Thompson v. Chrysler Motors Corp., 755 F.2d 1162, 1165 (5th Cir. 1985). A court can resolve the jurisdictional issue
by looking to any recognized method of discovery such as affidavits and depositions. Id. The facts outlined above
have been taken from the following documents—(1) the Gulf Coast II Petition and Attached Exhibits, Doc. 9-1, (2)
Affidavit of Kenneth Wood, President of DCS, Doc 4-2, and (3) Affidavit of Wade Hladky, President of Gulf Coast
Credit, Doc. 9-2.
3
DCS’ only connection to Louisiana in the instant matter is that Gulf Coast sent e-mails and Acknowledgments to
DCS from its location in Louisiana. DCS has some other contacts with Louisiana, but those contacts, from 2013, are
unrelated to this dispute. In 2013, DCS registered to do business in the State of Louisiana in order to perform work on
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Louisiana State bank domiciled in the Parish of Orleans, licensed to do business in the State of
Louisiana, with its principal place of business in Louisiana. Gulf Coast II Petition ¶ 1, Doc. 9-1.
Although a non-party, another important entity in this dispute is Vinex Global, LLC (“Vinex”).
Vinex is a subcontractor that was hired by DCS to complete a project in Denver, Colorado.
Affidavit of Kenneth Wood ¶ 8, Doc. 4-2.
While Vinex had a direct relationship with Gulf Coast, DCS’ only relationship with Gulf
Coast was through Vinex. In order to receive advances from Gulf Coast Bank, Vinex entered into
a Receivables Purchase Agreement (“RPA”) with Gulf Coast. Gulf Coast II Petition ¶¶ 22-24,
Doc. 9-1. Under the terms of the RPA, Vinex was entitled to sell certain of its accounts receivables
to Gulf Coast, and upon buying the receivables, Gulf Coast arguably obtained ownership of those
receivables. Id.
On four separate occasions in late 2015, Vinex needed financial accommodations from
Gulf Coast. See Affidavit of Wade Hladky, Doc. 9-2. On each occasion, Vinex offered to sell and
assign invoices to Gulf Coast that DCS owed to Vinex. Id. Before purchasing the four invoices,
Gulf Coast, via e-mails, sent Invoice Acknowledgment Agreements (“Acknowledgments”) to DCS
requesting that DCS acknowledge the obligation to pay each invoice. Id. ¶¶ 3, 8, 13, 18.
All of the Acknowledgments were substantially the same. See Gulf Coast II Petition
Exhibits A, E, F, G, Doc. 9-1. They were addressed generally to Designed Conveyor Systems, LLC
at its address in Franklin, Tennessee and requested that DCS acknowledge that certain invoices
were “currently due in the amount indicated.” Id. Additionally, they said that payment of the
invoices could be made to Gulf Coast via mail at an address in Dallas, Texas or via wire to a bank
a single project in Baton Rouge. Affidavit of Kenneth Wood ¶ 5, Doc. 4-2. The project was negotiated and contracted
in Pittsburgh, Pennsylvania and Nashville, Tennessee. Id. ¶ 6. DCS finished that project in the fall of 2013 and has
not performed or solicited any work in Louisiana since its completion. Id. ¶¶ 6, 7.
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account in New Orleans, Louisiana. Id. Corey Fager, on behalf of DCS, signed each
Acknowledgment at DCS’ office in Franklin, Tennessee. Id.; Affidavit of Kenneth Wood ¶ 20, Doc.
4-2. Based on DCS’ representations, Gulf Coast agreed to purchase the four invoices and thereafter
extended financial accommodations to Vinex. Affidavit of Wade Hladky, ¶¶ 5, 10, 15, 20, Doc. 92.
The first three Acknowledgments are not at issue in this case because DCS paid them. Id.
¶¶ 7, 12, 17. This dispute arises out of the fourth Acknowledgment. DCS has not paid this invoice
because Vinex allegedly breached its subcontract with DCS in October 2015 by abandoning the
Denver project without advance notice. Affidavit of Kenneth Wood ¶ 9, Doc. 4-2. Due to this
improper abandonment, DCS terminated the subcontract with Vinex on or around October 20,
2015, and subsequently filed suit against Vinex in Tennessee.4
Gulf Coast sued DCS on April 6, 2016 in Orleans Parish on various State law claims (“Gulf
Coast I”). DCS removed Gulf Coast I to the United States District Court for the Eastern District
of Louisiana.5 On June 2, 2016, Gulf Coast voluntarily dismissed its Petition. That same day, Gulf
Coast refiled its Petition in East Baton Rouge Parish (“Gulf Coast II”). DCS removed the case here
and filed the instant Motion seeking dismissal.
II.
PERSONAL JURISDICTION
When a nonresident defendant moves to dismiss for lack of personal jurisdiction, the
plaintiff bears the burden of establishing that the court has jurisdiction over the defendant. Stuart
v. Spademan, 772 F.2d 1185, 1192 (5th Cir. 1985). When a court rules on a motion to dismiss for
On November 12, 2015, DCS sued Vinex in Tennessee seeking a declaratory judgment as to Vinex’s material breach
of the subcontract. DCS argues that it does not owe Gulf Coast money on the last Acknowledgment because under the
terms of the subcontract, Vinex and any of its assignees, including Gulf Coast, is not entitled to payment. Affidavit of
Kenneth Wood ¶ 12, Doc. 4-2.
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Defendant filed a Motion to Dismiss in that action that is substantially similar to the present Motion. Def’s. Supp.
Mem. 5, Doc. 4-1.
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lack of personal jurisdiction without holding an evidentiary hearing, the plaintiff needs to make a
prima facie showing of personal jurisdiction. Johnston v. Multidata Sys. Int’l Corp., 523 F.3d 602,
609 (5th Cir. 2008). In deciding upon a motion to dismiss for lack of personal jurisdiction, a court
must accept the plaintiff’s allegations as true, other than those which are controverted by the
defendant or are simply conclusory statements, and conflicts between the parties’ facts are resolved
in the plaintiff’s favor. Panda Brandywine v. Potomac, 253 F.3d 865, 868 (5th Cir. 2001).
In a diversity action, a federal court may exercise personal jurisdiction over a nonresident
defendant (1) as allowed under the State’s long-arm statute; and (2) to the extent permitted by the
due process clause of the fourteenth amendment. Johnston, 523 F.3d at 609. Because the Louisiana
long-arm statute and the limits of constitutional due process are coextensive, the two-step inquiry
collapses into one constitutional inquiry. Southern Filter Media, LLC v. Halter, Civil Action No.
13-116-JJB, 2013 WL 3423269, at *2 (M.D. La. Jul. 8, 2013).
The fourteenth amendment due process clause “requires satisfaction of a two-prong test in
order for a federal court to properly exercise jurisdiction: (1) the nonresident must have minimum
contacts with the forum State, and (2) subjecting the nonresident to jurisdiction must be consistent
with traditional notions of fair play and substantial justice.” Freudensprung v. Offshore Tech.
Servs., Inc., 379 F.3d 327, 343 (5th Cir. 2004) (citations omitted). A court must analyze the
defendant’s contacts with the forum State to determine whether they are continuous and
systematic, thereby giving rise to general personal jurisdiction, or whether the cause of action
arises out of the defendant’s contacts with the forum State, thereby giving rise to specific personal
jurisdiction. Jones v. Petty-Ray Geophysical, Geosource, Inc., 954 F.2d 1061, 1068 (5th Cir.
1992).
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A.
General Jurisdiction
A court may assert general jurisdiction over foreign (i.e. sister-state or foreign-country)
companies to hear any and all claims against them when their affiliations with the State are so
continuous and systematic as to render them essentially at home in the forum State. Daimler AG
v. Bauman, 134 S. Ct. 746, 754 (2014) (emphasis added). “It is therefore, incredibly difficult to
establish general jurisdiction in a forum other than the place of incorporation or principal place of
business.” Monkton Ins. Servs., Ltd. v. Ritter, 768 F.3d 429, 432 (5th Cir. 2014). The fact that an
entity is registered to do business in a forum State and maintains an agent for service of process in
a forum State is insufficient to establish general jurisdiction. Wenche Siemer v. The Learjet
Acquisition Corp., 966 F.2d 179, 183 (5th Cir. 1992); DNH, L.L.C v. In-N-Out Burgers, 381
F.Supp.2d 559, 565 (E.D. La. 2005).
Plaintiff argues that this court has general personal jurisdiction over DCS for five reasons—
(1) DCS executed and sent four separate Acknowledgments to a Louisiana Bank; (2) DCS
transmitted funds to Gulf Coast in Louisiana via wire transfer; (3) DCS was aware that Gulf Coast
was located in Louisiana; (4) DCS has a license to perform work in Louisiana; (5) DCS has
performed work in the State; and (6) DCS has a registered agent for service of process in Louisiana.
Pl.’s Opp’n 8, Doc. 9. The Court finds otherwise.
This Court lacks general personal jurisdiction over DCS because DCS does not have
sufficient contacts with Louisiana to render it essentially at home in Louisiana. DCS is an Indiana
limited liability company with its principal place of business in Tennessee. Affidavit of Kenneth
Wood ¶ 4, Doc. 4-2. Although registered to do business in Louisiana, DCS does not have an office
in the State, nor does it rent property in the State. Id. It does not have facilities, records, or
employees in the State. Id. Additionally, DCS does not have any ongoing projects in the State; in
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fact, the last project it performed in Louisiana was in 2013. Id. Accordingly, this Court finds that
DCS’ minimal contacts with Louisiana do not give rise to general jurisdiction.
B.
Specific Jurisdiction
Specific jurisdiction focuses on the relationship among the defendant, the forum and the
litigation. Walden v. Fiore, 134 S. Ct. 1115, 1121 (2014). To establish specific jurisdiction, a
defendant must have purposefully directed his activities at a forum, and the litigation must result
from injuries that arise out of those activities. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472
(1985). Due process requires that a defendant be haled into court in a forum State on his own
affiliation with the State, not based on the random, fortuitous, or attenuated contacts he makes by
interacting with other persons affiliated with the State. Walden, 134 S. Ct. at 1123 (citation and
quotation marks omitted).
The Fifth Circuit applies a three step inquiry to determine if a court has specific personal
jurisdiction: (1) whether the defendant has minimum contacts with the forum State, that is, whether
it purposely directed its activities toward the forum State or purposefully availed itself of the
privileges of conducting activities there; (2) whether the plaintiff’s cause of action arises out of or
results from the defendant’s forum related contacts; and (3) whether the exercise of personal
jurisdiction is fair and reasonable. Monkton, 768 F.3d at 433.
The burden is on the plaintiff to establish the first two prongs, and if it does, the burden
shifts to the defendant to show that exercising jurisdiction would be unfair or unreasonable. Id.
1. Minimum Contacts
The first step, the minimum contacts inquiry, is “fact intensive and no one element is
decisive; rather, the touchstone is whether the defendant purposely directed his activities towards
the forum State, such that he could reasonably foresee being haled into court there.” Southern
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Filter, 2013 WL 3423269, at *2 (citation omitted). The plaintiff cannot be the only link between
the defendant and the forum; rather, it is the defendant’s conduct that must form the necessary
connection with the forum State that is the basis for jurisdiction over him. Walden, 134 S. Ct. at
1122.
The Fifth Circuit has “repeatedly held that the combination of mailing payments to the
forum State, engaging in communications related to the execution and performance of the contract,
and the existence of a contract between the nonresident defendant and a resident of the forum are
insufficient to establish the minimum contacts necessary to support the exercise of specific
personal jurisdiction over the nonresident defendant.” Freudensprung, 379 F.3d at 344; see also
Holt Oil & Gas Corp. v. Harvey, 801 F.2d 773, 778 (5th Cir. 1986) (holding that specific
jurisdiction was impermissible by a Texas federal court where a defendant entered into a contract
with a Texas plaintiff, sent final contract to plaintiff in Texas, sent checks to plaintiff’s address in
Texas, and engaged in written and telephone communications); Stuart, 772 F.2d at 1194 (finding
no indication that the nonresident defendant intended to avail himself of the privilege of doing
business in Texas and hence no specific jurisdiction where nonresident defendant contracted with
Texas residents, directed letters and phone calls to Texas, and shipped prototypes and products to
Texas at request of Texas residents).
Gulf Coast points to three actions by DCS to argue that DCS does have sufficient minimum
contacts with Louisiana necessary for specific jurisdiction—(1) DCS voluntarily executed
Acknowledgments with Gulf Coast, a Louisiana Bank, in order to induce Gulf Coast to extend
credit in Louisiana to DCS’ subcontractor Vinex; (2) DCS transmitted funds to Gulf Coast on three
separate occasions in Louisiana; and (3) DCS communicated with Gulf Coast by sending the
Acknowledgments to Louisiana. Pl.’s Opp’n 4-7, Doc. 9. Construing the facts in the light most
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favorable to the Plaintiff, as this Court is required to do, and interpreting the Acknowledgment as
a contract (which DCS denies), DCS does not have sufficient contacts with Louisiana to allow this
court to exercise specific personal jurisdiction for two reasons.
First, DCS did not purposefully direct its activities towards Louisiana.6 DCS’ contacts with
Louisiana are not based on its own actions directed toward Louisiana but merely on its reactions
and responses to Gulf Coast, a company that was fortuitously located in Louisiana. The
communications and wire transfers between Gulf Coast and DCS were initiated by Gulf Coast, not
DCS; therefore they are insufficient to confer jurisdiction. Walden, 134 S. Ct. at 1122-23 (“[T]he
relationship must arise out of contacts that the defendant himself creates with the forum… Due
process requires that a defendant be haled into court in a forum State on his own affiliation with
the State, not based on the random, fortuitous, or attenuated contacts he makes by interacting with
other persons affiliated with the State.”) (quotation marks and citation omitted); Monkton, 768
F.3d at 433 (holding that communications and wire transfers were insufficient to confer
jurisdiction where the communications and transfers were initiated by the resident plaintiff).
Second, DCS’ contacts with Louisiana are so minimal that this Court finds that DCS could
not reasonably foresee being haled into court in Louisiana. As the Fifth Circuit has consistently
held, merely contracting with, communicating with, and paying a forum resident are not the types
of contacts that allow a court to exercise specific jurisdiction. Freudensprung, 379 F.3d at 344. A
court addressing a similar factual pattern as the one presented here, held that “merely faxing an
acknowledgment of the notice of assignment to [a forum State] or mailing payments to [a forum
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DCS did not initiate contact with Gulf Coast—it never asked Gulf Coast for a loan nor did it do business with Gulf
Coast in Louisiana. Affidavit of Kenneth Wood ¶ 16, Doc. 4-2. Additionally, although Vinex had a relationship with
Gulf Coast in Louisiana, DCS’ only contact with Vinex was in Colorado. Id. ¶¶ 17, 18. In fact, DCS has never done
business with Vinex in Louisiana. Id.
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State] is insufficient to subject the nonresident to the forum’s jurisdiction.”7 Here, DCS signed
four Acknowledgments, sent a few e-mails, and made three wire payments to Louisiana. These
minimal contacts do not allow this Court to exercise specific jurisdiction over DCS.
Gulf Coast cites to various cases for the proposition that a “nonresident purposefully
establishe[s] minimum contacts with the forum State…by forwarding a guaranty to a [forum]
plaintiff so that the [forum] plaintiff would advance credit to [the non-forum defendant].” Pl.’s
Opp’n 5, Doc. 9. Gulf Coast argues that, based on these cases, DCS established minimum contacts
with Louisiana. This Court has considered the cases cited by the Plaintiff and finds them factually
distinguishable from the instant case for two reasons.
First, in all of the federal cases cited by the Plaintiff, the nonresident guarantor-defendant
initiated contact with the forum lender to get the forum lender to loan money or advance credit.
See Southern Filter, 2013 WL 3423269, at *1; Central Progressive Bank v. Kuntz, Civil Action
No. 08-4147, 2008 WL 5264260, at *4 (E.D. La. Dec. 17, 2008) (“The defendants in this case
personally solicited CPB, a Louisiana financial lending institution, to lend them money for their
business. In connection with the loan, the defendants negotiated and executed a Business Loan
Agreement, a Promissory Note, numerous Change in Terms Agreements, and the Commercial
Guaranties in favor of CPB, a Louisiana entity.”); Consolidated Cos. Inc. v. Kern, Civil Action
No. 99-2704, 2000 WL 1036186, at *3 (E.D. La. Jul. 25, 2000) (finding that the nonresident
defendant consciously chose to enter into a business relationship with a Louisiana company). In
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Applying federal law, a Texas Court of Appeals decision addressed a factually similar scenario to the present case.
Nationwide Capital v. The H. Epps Co., Civil Action No. 13-04-308, 2006 WL 1030105, at *4 (Tex. App. Corpus
Christi Apr. 20, 2006). The defendant was a Missouri contractor that subcontracted with another company to perform
work in Arkansas. Id. Subsequently, the subcontractor entered into an agreement with a Texas plaintiff in which it
sold its invoices to plaintiff. Id. On various occasions, the contractor responded to the plaintiff via fax, sending a
Notice of Assignment to plaintiff in Texas, acknowledging that it owed money to the subcontractor on the Arkansas
project. Id. The contractor also sent more than twenty checks to the plaintiff in Texas. Id. Citing Fifth Circuit law, the
Appeals Court held that “merely faxing an acknowledgment of the notice of assignment to [a forum State] or mailing
payments to [a forum State] is insufficient to subject the nonresident to the forum’s jurisdiction.” Id. at *5.
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contrast, the nonresident Defendant here, DCS, did not purposefully direct its activities towards
Louisiana; Gulf Coast (the forum lender) solicited DCS, purposefully directing its activities to
Tennessee.
Second, Plaintiff cites cases in which there is a very close connection between the company
receiving the loan and the nonresident defendant-guarantor such that the courts could reasonably
conclude that the guarantor-defendant was purposefully availing itself of the benefits of the forum
State. Southern Fitler, 2013 WL 3423269, at *1-2 (guarantor was investor of company receiving
loan); Central Progressive, 2008 WL 5264260, at *1 (guarantors were all members of the LLC
receiving a loan); Consolidated Cos. Inc., 2000 WL 1036186, at *1 (guarantor was primary
shareholder of companies receiving credit from forum company). In those cases, it was reasonable
for the courts to find that the defendant-guarantors purposely availed themselves of the benefits of
the forum State because the guarantor-defendants were deriving direct benefits—by signing
guaranties, their companies received loans in the forum State. In this case, the Court finds that
DCS did not purposely avail itself of the privileges of conducting business in Louisiana. Although
DCS may have signed Acknowledgments, DCS was not receiving a loan for itself or a subsidiary.
For the reasons stated above, the Court finds that Gulf Coast has failed to establish a prima
facie showing that DCS has the requisite minimum contacts with Louisiana that would allow this
Court to exercise specific jurisdiction.
2.
Reasonableness
Under a specific jurisdiction inquiry, the burden is on the plaintiff to establish that the
defendant has sufficient minimum contacts with the forum State and that the cause of action arises
out of those contacts. Monkton, 768 F.3d at 433. If the plaintiff can establish these prongs, the
burden shifts to the defendant to show that exercising jurisdiction would be unfair or unreasonable.
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Id. This Court finds that Plaintiff has failed to meet its burden on the first two prongs and so it
need not address whether the exercise of jurisdiction would be fair and reasonable.
III.
CONCLUSION
For the reasons stated above, the Defendant’s Motion to Dismiss (Doc. 4) is GRANTED
and the case is dismissed without prejudice.
Signed in Baton Rouge, Louisiana, on September 14, 2016.
JUDGE JAMES J. BRADY
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
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